The economic downturn from the pandemic was a rude awakening for many millennials and Gen-Zers. It was an even harsh reminder of how fleeting financial security can be.
One day you have a job, and the next day you are unemployed with no emergency funds for additional support.
With the growing investor confidence and the shift in attitude on how to make and invest money, there is just one thing that young people forget when they make all of this money. And that’s taxes.
If you haven’t started gathering your tax documents properly, you could be leaving room for mistakes that could be costly.
According to a study by the Stanford Institute for Economic Policy and Research, African-Americans are five times as likely to have their federal tax returns audited than taxpayers of any other race.
Paul Njoku is a Houston-based certified public accountant and founder of PKN Accounting and Tax Service PLLC. Here are his top five mistakes young people make when it comes time to file taxes:
- Not indicating that you work multiple jobs – “I have seen folks who work multiple jobs and don’t indicate on their W-4s that they do. They come to me frustrated when they owe taxes.”
- Mixing your business account with your personal account – “Folks with businesses use a personal account to manage all revenue and expenses. For example, travel nurses working as independent contractors not forming an LLC to protect their personal assets from legal issues.”
- Not reading IRS or State Comptroller letters – “Not having the courage to read letters regarding your federal and state tax situation will get you into serious problems. Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. Respond to minimize additional interests and penalty charges.”
- Not keeping records of your past tax forms – “Everyone should keep tax support documents for at least three years to substantiate IRS inquiries.”
- Not filing with a professional – “Procrastinating on filing taxes and not sitting with a professional to determine a proper tax strategy on time.”